Mantra Group Limited, in the matter of Mantra Group Limited (No 2) [2018] FCA 805

legal principles 4 Section s 411(4) of the Act provides that an arrangement is binding relevantly on the members of a company and on the company if: (1) at a meeting convened in accordance with an order of the Court under subs (1) a resolution in favour of the arrangement is passed by a majority in number of the members present and voting in person or by proxy and by 75% of the votes cast on the resolution; and (2) it is approved by order of the Court. 5 In Central Pacific Minerals NL [2002] FCA 239 at [12] Emmett J said that in considering whether to approve an arrangement the Court first must be satisfied that resolutions have been passed in accordance with the statutory requirements and secondly must consider the exercise of its discretion whether to approve the arrangement. 6 In Texon Petroleum Limited, in the matter of Texon Petroleum Limited (No 2) [2013] FCA 147 at [6] Farrell J recognised that the general principles which guide the Court's discretion at the second Court hearing are well established. 7 The Court has the discretion to determine whether to approve a scheme and is not bound to approve it merely because it has made orders for the convening of a scheme meeting or because the statutory majorities have been achieved. That said, the Court will usually approach the task upon the basis that members of a company are better judges of what is in their commercial interest than the Court: see Re Seven Network Ltd (ACN 052 816 789) (No 3) (2010) 267 ALR 583; [2010] FCA 400 (Re Seven Network) (Jacobson J) at [31]-[32]. 8 In Re Seven Network at [35]-[40] Jacobson J set out the following considerations which have informed the Court's discretion as to whether to approve a scheme: (1) whether the shareholders have voted in good faith and not for an improper purpose; (2) whether the proposal is fair and reasonable so that an intelligent and honest person who is a member of the relevant class of shareholders, properly informed and acting alone, might approve it; (3) whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; (4) whether there has been full and fair disclosure of all information material to the decision; (5) whether minority shareholders would be oppressed by the scheme; and (6) whether the scheme offends public policy.

consideration 9 I was satisfied that all necessary procedural requirements had been met: (1) the Orders were lodged with the Australian Securities and Investments Commission (ASIC) and a copy of the Scheme Booklet was registered with ASIC prior to despatch to members; (2) subject to one matter addressed at [10] below, between 9 and 23 April 2018 the Scheme Booklet, substantially in the form approved at the first Court hearing, was despatched to each Scheme Shareholder either electronically or by post in accordance with the Orders. Where despatch was by email, the email sent included links to the Scheme Booklet and an online portal to lodge a proxy vote. Where despatch was by post, the package comprised the Scheme Booklet, a proxy form and a reply paid envelope addressed to Link Market Services Limited (Scheme Documents) as required by the Orders; (3) the Scheme Meeting was held in accordance with the Orders. It was chaired by Peter Hallam Bush and held at the time and place specified in the Scheme Booklet; (4) as set out at [2] above, the statutory majorities were obtained at the Scheme Meeting. The number of shares voted at the Scheme Meeting represented 53% of all shares on issue and 1,241 of approximately 7,000 shareholders either voted or abstained from voting, representing a turnout of approximately 17.7% of shareholders, a relatively low number. In Avoca Resources Limited, in the matter of Avoca Resources Limited [2011] FCA 208 at [21] Greenwood J observed that the Court has expressed an interest in knowing the turnout percentage of eligible shares and of shareholders. In that case approximately 11.49% of the shareholders were represented at the meeting. His Honour noted that while those percentages have no statutory significance, a low turnout percentage might suggest a flaw in the convening procedure but held there was no basis for such an inference to be drawn in that case. In Medical Australia Ltd, in the matter of Medical Australia Ltd (No 2) [2017] FCA 1429 the voter turnout at the scheme meeting was also relatively low at 19.08% of the total number of shareholders but, notwithstanding that, the scheme was approved: at [9]. In this case, there is nothing to suggest that the relatively low voter turnout was because of any flaw in the Scheme. Santow J observed in Re Matine Ltd (1998) 28 ACSR 268 at 295 that "the apathetic shareholder who chooses not to vote upon a scheme should not be presumed to be antagonistic to the scheme or to warrant paternalistic protection". His Honour went on to note that that is why the voting test for schemes is by reference to shareholders "present and voting" and not by reference to total issued capital or total shareholders of the relevant class; (5) the date of the second Court hearing was advertised in The Australian newspaper on 15 May 2018 in accordance with the Orders; (6) Mantra shareholders were also notified of the date of the second Court hearing in the Scheme Booklet, although with the time incorrectly recorded as 10.15 am rather than 2.15 pm. The evidence before me established that as at approximately 12.40 pm on the date of the second Court hearing, the solicitors for Mantra had not received any notices of appearance nor any other form of communication from anyone indicating any intention to appear at the second Court hearing, suggesting that it was extremely unlikely that anyone came to Court at the incorrectly recorded time for the second Court hearing. At the hearing there was no appearance by any party other than Mantra and AAPC Limited (AAPC); (7) by letter dated 22 May 2018 ASIC informed Mantra that under s 411(17)(b) of the Act it had no objection to the proposed scheme of arrangement under Pt 5.1 of the Act between Mantra and its members. ASIC did not appear at the second Court hearing; and (8) all conditions precedent (other than Court approval of the Scheme) had been either satisfied or waived. 10 The Scheme Documents were not despatched to any Mantra shareholder whose name was entered into the members' register in the period between 3 April 2018, the date on which shareholders' details were collated for notification of the Scheme Meeting, and 16 May 2018, the cut-off date for lodgement of proxies for the Scheme Meeting. During that period an additional 117 shareholders became Mantra shareholders (New Members). The New Members held 699,517 shares which represented 0.23% of the total number of ordinary Mantra shares on issue. None of the New Members lodged a proxy for the Scheme Meeting. I was satisfied that the absence of postal despatch of the Scheme Documents to the New Members did not present any impediment to the Scheme being approved for the following reasons: (1) first, pursuant to cl 13.1(g) of the Mantra Constitution any person who, because of a transfer of shares, becomes entitled to shares registered in the name of a member is bound by every notice which, before that person's name and address is entered on the members' register in respect of those shares, is given to the member in accordance with cl 13.1. Clause 13.1(a) permits the giving of notices to members by prepaid post and by email. As the Scheme Documents were either sent by prepaid post or notified by email to Scheme Shareholders who were members as at 3 April 2018 there was no deficiency in the manner in which the Scheme Documents were despatched; (2) secondly, the Scheme Booklet was readily accessible to Scheme Shareholders as there was a link to it prominently displayed in the investor section of Mantra's website and an announcement had been made by Mantra to the Australian Stock Exchange attaching a copy of the Scheme Booklet; and (3) thirdly, and most critically, the number of shares held by the New Members would not have had any effect on the passing of the resolution had all of them voted against the resolution given that they only represented 0.23% of the total number of ordinary Mantra shares on issue. 11 In Consolidated Media Holdings Limited, in the matter of Consolidated Media Holdings Limited (No 2) [2012] FCA 1224 at [5]-[8] and Afterpay Holdings Limited, in the matter of Afterpay Holdings Limited (No 2) [2017] FCA 737 at [11]-[16] the Court also concluded in similar circumstances that there was no impediment to approval of the scheme being considered where the scheme documents had not been despatched to new members. 12 I was also satisfied that I should exercise my discretion in favour of approving the Scheme. 13 There was nothing to suggest that members voted other than in good faith or that they cast their vote for an improper purpose. The shareholders who attended the meeting voted overwhelmingly in favour of the Scheme. There was also nothing to suggest that any member had been treated in a way that might be characterised as oppressive. 14 The proposal is fair and reasonable such that an intelligent and honest person, who was a member of the relevant class, properly informed and acting alone, might approve it. The evidence provided to the Court in connection with the application to convene the Scheme Meeting established that to be so: see Mantra Group Limited, in the matter of Mantra Group Limited [2018] FCA 510 at [9]-[10]. No one came forward to oppose the Scheme and, when invited to do so, no member attending the meeting, either in person or by proxy, raised any questions or issues in relation to it. As I have already observed, the Scheme was supported by a clear majority of those shareholders who attended the Scheme Meeting. 15 I was satisfied that Mantra brought all matters that would be considered relevant to the exercise of the Court's discretion to the Court's attention; that there had been full and fair disclosure of all information material to the decision; and that the Scheme does not offend public policy.

conclusion 16 For those reasons I made Orders approving the Scheme. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.